India’s construction boom hits Gulf

The handful of workers waiting beside the crudely painted iron doors of Gulf Test, a company in the Mumbai suburb of Bandra, are a disheartening sight for Ansari Gulam Nabi. Mr Nabi is a recruitment consultant who finds workers for Saudi Arabian construction giants such as Saudi Oger and Consolidated Construction.

“Before, there were 1,000 people standing here, all waiting for jobs,” he said, shaking his head. “Now look, there are hardly 15.”

Inside Gulf Test’s shed-like premises, Indian electricians, plumbers and carpenters receive certified credentials to work in the UAE, Saudi Arabia and Kuwait.

It is 11 in the morning, and Mr Nabi has just arrived to try and mop up the successful applicants. But he has had little luck. “Look,” he said, pulling out a printed spreadsheet. “I have 700 visas now. But we’ve gone to Mumbai, Delhi and the Punjab, and I only have 150 workers. It’s very bad news for us. We can’t find people who want to go abroad.”

When India’s economy first began to pick up steam, a decade or so ago, the country’s unskilled and semi-skilled workers were left behind, stuck with dollar-a-day salaries while the highly qualified cashed in. Now though, according to a report to be released by India’s Construction Industry Development Council (CIDC), artisans are in high demand.

“For the past five years in the construction industry, the wages have only gone up by 15 to 20 per cent per annum,” said the CIDC director general, P R Swarut. “What I anticipate is that this year there is going to be a correction; we are going to see a rise of 35 to 40 per cent.”

New shopping malls, roads, factories and airports are cropping up across the country, and the nation’s 31 million construction workers are no longer enough to meet the soaring demand in major developments.

“There is a shortfall of 1.5 million workers at present, which shall grow by 15 to 20 per cent per year for at least three years,” Mr Swarut said.

The problem has been exacerbated by the new government rural employment schemes launched in India in the past two years, which Mr Swarut argued had kept about three million potential migrants at home in poorer states such as Bihar, Uttar Pradesh and Orissa.

The result is already being felt by people running some of India’s major industrial projects.

Harry Wijnen Reims, the site director at ABB, the Swedish construction company, at Essar Oil’s refinery in Gujarat, confirmed wages were now going up by about 30 to 40 per cent a year.

“It just started recently,” he said. “You won’t believe it, but there is now so much work going on that it is hard to get people. I’m now going south to work on the Nagarjuna refinery, and they’ve told me already that getting labour is proving difficult.”

The knock-on effect is being felt in the Gulf.

“Very definitely in the last two years, and particularly in the last 12 months, we’ve seen a tremendous strain in the supply chain of skilled workers,” said Samir Khosla, who is the vice chairman of Dynamic Staffing Services (DSS). “We are of the opinion that the escalation of wages in the Indian market is a key part of that.

DSS is suffering the same problems experienced by Advanced Consultants Services (ACS), which is Mr Nabi’s employer. “It’s the skilled categories we have a problem with,” said Mr Khosla. “We are still able to fulfil about 80 to 85 per cent of the requisitions, but we struggle for that last 20 per cent.”

For some trades the CIDC report underplayed the level of wage inflation. “Finding carpenters, marble setters, mosaic layers: these kinds of guys are commanding a market premium,” said Mr Khosla. “In the four key cities of India a marble setter can now hope to earn 14,000 (Dh1,200) to 15,000 rupees a month. That’s a hell of a lot of money. That’s more than graduates are making in call centres.”

With that kind of money available, the lure of the Gulf is fading fast. The rupee last year rose against the dirham, which is pegged to the dollar, cutting Indian construction workers’ savings here and causing protests.

Mr Khosla estimated that a worker with the skills most in demand could now only expect to save about 20 per cent more if he spent a year working in the Gulf than he would if he had stayed at home in an Indian city. Five years ago he could have saved three times the amount.

In the three decades since DSS first started moving Indian labourers to the Gulf, the pay differential has never fallen this low. “This industry is more than 30 years old, and in all of those 30 years the Indian economy has never awakened,” said Mr Khosla. “The level of employment in the construction industry was never at the level which it is today. Every airport in India today is under redevelopment.”

The movement of workers is even starting to reverse direction. “The present trend is to return to India, on account of higher labour wages,” Mr Swarut said. “Many of the technical skills Indian workers have developed working on advanced construction projects in the Gulf are now in demand at home.”

Mr Khosla cited the tower crane operators as an example. “Up until three years ago, you would probably only see three tower cranes on the skyline of New Delhi,” he said. “Today there are probably six in the airport alone.”

Back outside Gulf Test, Mr Nabi expressed his exasperation at the refusal of ACS’s Saudi and Kuwaiti clients to offer better conditions and salaries. “The companies take people from here and then they don’t give them any salary for three to four months,” he said. “The people hear that, and they don’t want the jobs.”

Yusuf, who is Mr Nabi’s assistant, complained that Gulf employers were slow to react to the strengthening of the rupee: “They think ‘My money is the number one money of all countries’. They are still thinking ‘My Kuwait Dinar is the king of money’.”

But Gulf companies are, in fact, starting to take notice, especially after wage protests shook Dubai earlier this year. According to DSS, companies in the Gulf have increased wages by 20 per cent, with some of its clients even increasing pay by 30 per cent.

At the same time the rupee has weakened a little, losing 11 per cent against the dollar so far this year. Still, Gulf employers typically take between one and two years to react to changes in salaries in India, Mr Khosla said, adding: “The Gulf trails India.”

Mr Khosla estimated that about four million new workers would be needed for the Gulf’s planned petrochemical projects alone.

Attracting them will require employers in the region to out-compete similar projects back in India. According to Mr Khosla, that should not be too much of a problem. “The funding here is a lot stronger than in India,” he said. “With the prices at which they’re selling real estate, developers are able to sustain profits that will allow them to pay Indians better to come to the UAE.”

But now that India’s economy has awoken, the days when the Gulf could enjoy some of the world’s highest incomes, while employing one of the world’s cheapest labour forces, look numbered.

Written by :- Richard Orange

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Posted by battakiran on June 30, 2008 at 2:40 pm
Filed under Indian Economy &nbsp|
Tags: Construction, gulf, India &nbsp|
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